SOEs to further reduce debt to strengthen performance

by Liu Zhihua

BEIJING (China Daily/ ANN) - China’s State-owned enterprise regulator vowed to further deleverage SOEs debt level, and continue mergers and acquisitions among SOEs, to optimize resources allocation and boost SOEs performance.
“The whole society pay close attention to performance of SOEs, and deleveraging is a national strategy that we attach great importance and implement continuously and attentively,” said Peng Huagang, deputy secretary-general and spokesman of the State-owned Assets Supervision and Administration Commission at a media conference on Thursday.

The commission have implemented M&As of 38 SOEs, and now the number of central SOEs have reduced to 96, according to Peng.

A total of 18 enterprises actively and steadily implemented market-oriented debt-to-equity swaps, and have signed framework agreements worth of about 500 billion yuan ($75 billion), among which agreements of 200 billion yuan have already been conducted, he said.

Key measures for next phase to deleverage SOEs debts include improving work organizing to ensure that responsibility is assigned to and addressed by individuals, adjusting and optimizing SOEs’ investment structure to avoid making loans to invest, implementing supply side structural reform to cut overcapacity, according to Peng.

Other measures include strengthening capitals and cash flow management to improve the efficiency of capital use, and comprehensively strengthening risk prevention and debt control.

“We must watch out for debt risk, and keep the bottom line to avoid major risk from happening,” Peng said.

The commission announced at the conference that debt-to-asset ratio of SOEs maintained a steady but downward trend in the first half of 2018.

By the end of June, the average debt-to-asset ratio was 66 percent, a 0.5 percentage points drop on a year-on-year basis, and a 0.3 percentage points drop compared with that in the beginning of the year.

The total interest-bearing liability of SOEs grew 4.9 percent, which was 2.3 percentage points lower than that in the beginning of the year. 中央
A total of 59 enterprises saw their debt-to-asset ratio declined from the beginning of 2018, among which 29 dropped by more than 1 percentage point.

Peng also said that the commission will keep promoting M&As of SOEs in key industries.

“Mergers and acquisitions among SOEs is a continuous progress that involves not only fusing of management but also resources and corporate cultures,” Peng said.

Next, the commission will promote group-level restructuring to better serve the national strategy of supply-side structural reform and industrial upgrade and transformation, as well as to improve the overall efficiency of central SOEs through merging non-core business units of a company to a business leader, a measure the commission has been adopting in the past two years.

The commission will also strengthen inspection of newly merged enterprises, to evaluate M&As results, and to direct operation for better efficiency.

The first half of 2018 witnessed record-high growth in SOEs’ revenues and profits, the commission announced at the media conference.

The accumulated operating revenue of SOEs in the first six months this year was 13.7 trillion yuan, a year-on-year increase of 10.1 percent, and the growth rate was 1.4 percentage points faster than that of the first quarter.

In June, the operating revenue was 2.7 trillion yuan, a year-on-year increase of 10.7 percent.